Investing In Gold And Silver For Capital Preservation And Appreciation

A Simple Gold Trading Strategy

Trading gold and silver can make you a fortune. The best way to trade gold, silver or other precious metals is to trade futures contract. Now, trading futures can be risky. Futures contracts move fast and show a lot of volatility. Traders profit from this volatility. However, if you are not comfortable with risk then you can keep on trading gold and silver ETFs like the SPDR Gold Shares (GLD) or the iShares Silver Trust (SLV) and other precious metals ETFs. But the point is this that anyone can learn futures trading and profitably trade gold and silver futures contracts.

Trading gold and silver can make you a fortune. The best way to trade gold, silver or other precious metals is to trade futures contract. Now, trading futures can be risky. Futures contracts move fast and show a lot of volatility. Traders profit from this volatility. However, if you are not comfortable with risk then you can keep on trading gold and silver ETFs like the SPDR Gold Shares (GLD) or the iShares Silver Trust (SLV) and other precious metals ETFs. But the point is this that anyone can learn futures trading and profitably trade gold and silver futures contracts.

Gold trading can make you a fortune. If you have been trading forex than you won’t find it difficult to spot trade gold. However, trading gold futures can be highly lucrative. The difference being that the futures market is highly regulated while forex market is unregulated with a lot of broker scams taking place in it. This is not possible in the futures market. Let’s discuss our gold futures trading strategy. One futures contract controls 100 ounces of gold in the futures market. You can buy one contract of gold at a margin of $5,000 with most of the brokerages. So, with just $5,000 in your account, you can control 100 ounces of gold in the market. If the market price of gold is $1,000 per ounce, this means with only $5,000, you can control $100,000. This is what we call leverage in trading. Right now, gold prices are somewhere around $1,300, so 100 ounces of gold can be worth $130,000. Each point the gold futures contract moves, it means $10. So, if it moves 1 point up, you make $10 and if it makes 1 point down, you lose $10. If it moves up by 50 points and you are long on this contract, it means you have made $500.

This gold trading strategy is simple and it basically revolves around managing your risk in the market. This trading strategy involves making a series of four trades. So, let’s start with out first trade. You buy one gold futures contract. In a few days, the contract moves up by 50 points. You make $500 when you decide to sell the contract.This completes your first trade!

Now, your second trade starts in a series of four trades. You are happy with your first trade. You have made $500. You enter the market again with two contracts now. You wait for a few days and lo and behold, the market moves 50 points up as you had expected. You sell the two contracts and make a nice $1,000 profit. Your second trade is now complete.

Now, markets don’t move in straight lines. Prices move up, then down and then up. Recently gold prices went as high as $1,400 then made a sudden retracement of around $70 just a few days later shocking everyone in the market. So, when the prices move down, don’t get shocked. Nothing moves up forever. Whatever moves up will come down also. Now,rumors can make the market jittery. Gold prices rise during times of global political and economic uncertainty. Rumors are flying in the market that gold prices will move up again. You wait for a few days and it does start to rise. You buy three contracts this time and wait for a few days and lo and behold, the market moves by 100 points by the end of the week. You sell the three contracts and make a nice $3,000 profit.

Suddenly gold prices drop like what happened a few days back. You are shocked. But don’t worry; this is the way markets work. You wait for a few days and the prices again start climbing. You buy four gold futures contracts this time. You wait a few days before the contracts each move 50 points. You sell all the four contracts making a nice $2,000. This was the fourth trade in a series of four trades. Your net profit is $500+$1,000+$3,000+$2,000=$6,500! Not bad! Now, you will start all over again with a new series of four trades repeating what you did above.

This is a very simple gold trading strategy that depends on pyramiding your position with a series of four trades and removing all the profit from your account at the end of these four trades. With practice, you will find this gold trading strategy very simple and easy to implement.

Mr. Ahmad Hassam has done Masters from Harvard University. Trade Gold with this Forex Signals from two top gun traders. Learn How To Trade Futures from Malcolm Robinson, a former LIFFE pit trader.